<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
THE FUND
The Thai Capital Fund, Inc. (the "Fund") is a non-diversified, closed-end
management investment company. The Fund seeks long-term capital appreciation
through investment primarily in equity securities of Thai companies. The Fund's
investments in Thailand are made through a wholly-owned Investment Plan
established under an agreement between The Mutual Fund Public Company Limited
(the "Manager") and the Fund. The Fund's investments through the Investment Plan
are managed by the Manager. Daiwa International Capital Management (H.K.)
Limited provides the Manager with advice regarding investments by the Investment
Plan and manages the Fund's assets held outside the Investment Plan.
SHAREHOLDER INFORMATION
The Fund's shares are listed on the New York Stock Exchange ("NYSE") and the
Osaka Securities Exchange ("OSE"). The Fund understands that its shares may
trade periodically on certain exchanges other than the NYSE or the OSE, but the
Fund has not listed its shares on those other exchanges and does not encourage
trading on those exchanges.
The Fund's NYSE trading symbol is "TC". Weekly comparative net asset value
(NAV) and market price information about the Fund is published each Monday in
THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES, and each Saturday in
BARRON'S, and also in many other newspapers.
The Fund held its Annual Meeting of Shareholders on June 6, 1997 and a press
release summarizing the results of that meeting had been sent to the Fund's
registered holders shortly thereafter. If you would like to receive a copy of
that release, please contact Daiwa Securities Trust Company, the Fund's
Administrator (the "Administrator") at the number shown below.
INQUIRIES
All general inquiries and requests for information should be directed to the
Administrator, at (800) 933-3440 or (201) 915-3020. All written inquiries should
be directed to the Fund at the following address:
The Thai Capital Fund, Inc.
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
For specific information about your share account, please contact State
Street Bank and Trust Company (the "Plan Agent") at the address shown below.
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan (the "Plan") is available to provide
Shareholders with automatic reinvestment of dividends and capital gain
distributions in additional Fund shares. A brochure fully describing the Plan's
terms and conditions is available from the Plan Agent at the following address:
State Street Bank and Trust Company
c/o The Thai Capital Fund, Inc.
P.O. Box 8200
Boston, MA 02266-8200
Telephone: (800) 426-5523
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
July 31, 1997
DEAR SHAREHOLDERS:
The Management of The Thai Capital Fund, Inc. (the "Fund") would like to
take this opportunity to inform its shareholders about the Thai economy, the
activities of the Stock Exchange of Thailand ("SET"), and the Fund's performance
for the six months ended June 30, 1997.
REVIEW OF THE THAI ECONOMY DURING 1997
The Thai economy continued to slow down in the first half of 1997, as
indicated by the low growth rate of the Manufacturing Production Index and
Private Investment Index, both at 5.4% in April 1997, compared to 6.3% and 6.8%,
respectively, in January 1997. This reflected a lack of confidence in the
short-term, sluggish economic conditions, high cost of funds, and an export
slowdown since 1996.
Domestic interest rates were maintained at a high level due to the strong
U.S. Dollar ("US$"), which has decreased Thailand's competitiveness in the world
market. For the first four months of 1997, exports grew slightly at 2.3% while
imports fell 5.3%, compared to the growth rate of 7.25% and 16.49%,
respectively. Both trade and current account deficits improved from a deficit of
167.1 billion baht and 139.8 billion baht during the first four months of 1996
to 123.9 billion baht and 91.1 billion baht in the same period of 1997. However,
the balance of payments was in a deficit of 130.4 billion baht and international
reserves amounted to US$33.3 billion or 5.8 months of imports at the end of May
1997.
Loan extensions increased slightly by 13.3% during the first four months of
1997, compared to 21.0% during the same period of 1996, due to concern regarding
the quality of loans and a possible increase in non-performing and sub-standard
loans. Financial institutions have two to three years to build up the required
20% provision for sub-standard loans starting from June 1997.
THE THAI ECONOMIC OUTLOOK FOR THE SECOND HALF OF 1997
As part of the government's measures to curb economic pressures and to
enhance Thailand's export competitiveness, on July 2, 1997, the Minister of
Finance promulgated a change in the Thai exchange rate system from a basket of
currencies to a managed float system. As a result, the Thai baht depreciated to
31.576 baht per US$ on July 31, 1997, or a 22.6% depreciation from the rate on
June 30, 1997.
Even though the managed float system in the long term is expected to result
in the Thai economy stabilizing, exports improving, liquidity easing, and
interest rates eventually decreasing; the short term effects of the change in
the system should be quite dramatic and will require well-managed measures and
monetary policy discipline to curb higher inflation and intensifying
non-performing loans faced by financial institutions. Since domestic prices are
expected to increase, the Bank of Thailand ("BOT") is likely to impose a tight
monetary policy and maintain a high level of interest rates for the next few
months.
All in all, the Thai economy in 1997 will continue to slow down, with Gross
Domestic Product ("GDP") growth of 3.0%, and export and import growth of 3.0%
and 2.5%, respectively. The current account deficit is expected to be 7.0% of
GDP. Domestic prices should rise and the inflation rate is expected to be around
7.0%.
THE FIRST HALF OF 1997 STOCK MARKET OVERVIEW
During the first six months of 1997, the Thai stock market continued its
downward trend and market sentiment did not improve, as the government's
measures to solve Thailand's economic problems had not been
2
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
fully implemented. The slowdown in the Thai economy and the high interest rates
have caused the asset quality of local financial institutions to deteriorate. As
a consequence, Moody's Investor Services downgraded the credit rating of
Thailand's long-term debt from "A2" to "A3". Similarly, the BOT encouraged weak
finance companies to merge with strong ones. A further negative factor was the
baht depreciation against the US$ which caused concern of a possible baht
devaluation, even though the BOT intervened to defend the baht during the
attacks on the baht in February and May, 1997.
At the end of June 1997, the SET Index closed at 527, a decline of 304
points or 36.6% from December 31, 1996. During the period, the average daily
turnover was about 3.96 billion baht, a decline of 1.38 billion baht from the
average for 1996.
THE SECOND HALF OF 1997 STOCK MARKET OUTLOOK
The most important factor is the change in the foreign exchange system from
the basket system to a managed float system which became effective on July 2,
1997. This policy will have an impact on both the Thai economy and the
performances of listed companies. In 1997, the performance of most listed
companies is expected to be poor due to the effect of the economic slowdown,
high short-term interest rates, and a possible foreign exchange loss. Overall,
the Thai stock market could rebound in the short-term, mainly due to the
government's decision to change to a managed float system which caused the baht
to depreciate against the US$, making investment in the Thai stock market more
attractive. However, the slowdown in the economy, expected poor corporate
performance, and concern about non-performing loans of financial institutions
could prove to be negative factors limiting the extent of the rebound the Thai
stock market could experience in 1997.
Looking ahead, despite a rather gloomy picture of the Thai economy in
1997-1998, the Fund's management believes that the Thai government is on the
right track to curb the current economic difficulties. Notwithstanding the
volatility of the market during the current economic restructuring, long term
investments in the Thai stock market should prove beneficial when the economy
returns to its normal pace after a period of consolidation.
THE FUND'S PERFORMANCE AND STRATEGY
As of June 30, 1997, the net asset value of the Fund was US$6.63 per share,
compared to US$9.61 on December 31, 1996. The total investment return for the
six months ended June 30, 1997 was a negative 31.01%. During the same period,
the SET Index decreased by 37.04%, in US$ terms. Therefore, the Fund outpaced
the SET Index by 6.03% for the period.
During the remainder of 1997, the Fund currently intends to overweigh in the
energy and entertainment sectors and to take a neutral position in the banking
and construction sectors. The Fund currently intends to underweigh in the
building and furnishing, communication, finance and securities, and property
sectors.
The Fund has not invested, and presently does not intend to invest, in
derivative securities. Although foreign currency hedging is permitted by the
Fund's policies, the Fund has not engaged in any such hedging.
PORTFOLIO MANAGEMENT
Mrs. Charintorn Vongspootorn has been the Fund's portfolio manager since its
inception in June 1990. She has been employed by The Mutual Fund Public Company
Limited, the Fund's investment manager, for 22 years and her current position is
Senior Executive Vice President and head of the Fund Management Department.
3
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
Mr. Udom Vichayabhai resigned as the Fund's President and a Director on
January 31, 1997, positions in which Mr. Udom had effectively and faithfully
served the Fund since its inception in 1990. Mr. Damrongsuk Amatyakul was
elected by the Fund's Board of Directors as the new President in March, 1997 and
was elected a Director at the Annual Meeting of Stockholders held on June 6th.
Mr. Damrongsuk is also the President of The Mutual Fund Public Company Limited.
Finally, the Fund's management would like to thank all shareholders for your
continued participation and interest in The Thai Capital Fund, Inc. We hope to
continue to receive support from you, so that the Fund can move forward into the
next year of operations with stability.
Sincerely yours,
/s/ Shuichi Komori
SHUICHI KOMORI
CHAIRMAN OF THE BOARD
4
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
- -------------------------------------------
THAI COMMON STOCKS AND WARRANTS--
78.22%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
BANKS--22.42%
740,000 Bangkok Bank Ltd................... $ 3,705,026
270,000 Bank of Ayudhya Co., Ltd........... 419,173
886,100 Krung Thai Bank Ltd................ 937,172
221,500 The Siam Commercial Bank Ltd....... 833,903
848,500 The Thai Farmers Bank Ltd.......... 2,618,116
189,800 The Thai Farmers Bank Ltd.
Warrants, 1999*(1)................ 57,459
97,500 The Thai Farmers Bank Ltd.
Warrants, 1999*(2)................ 42,572
694,200 The Thai Military Bank Ltd......... 714,003
------------
9,327,424
------------
BUILDING MATERIALS--4.62%
325,000 Nakornthai Strip Mill Plc.*........ 58,024
69,500 Thai Wire Products Company Ltd..... 76,878
51,600 The Siam Cement Company Ltd........ 773,049
56,100 The Siam City Cement Company
Ltd............................... 228,624
150,000 Tipco Asphalt Company Ltd.......... 785,950
------------
1,922,525
------------
CHEMICALS--0.90%
188,500 Aromatics Thailand Company Ltd.*... 44,628
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
319,200 National Petrochemical Company
Ltd............................... $ 328,306
------------
372,934
------------
COMMERCE--1.46%
195,900 Berli Jucker Company Ltd........... 608,267
------------
COMMUNICATION--8.61%
167,850 Advanced Information Service
Company Ltd....................... 1,472,311
352,000 Jasmine International Company
Ltd............................... 327,887
48,200 Shinawatra Computer Company Ltd.... 334,865
195,900 Shinawatra Satellite Company
Ltd............................... 237,604
997,200 Telecom Asia Corporation Ltd.*..... 1,209,490
------------
3,582,157
------------
ELECTRONIC COMPONENTS--1.95%
295,200 CVD Entertainment Company.......... 504,126
18,500 Hana Microelectronic Company
Ltd............................... 86,881
40,200 KCE Electronics Company Ltd........ 123,260
100,000 Thai Precision Manufacturing
Company Ltd.*+.................... 95,090
------------
809,357
------------
ENERGY--12.38%
109,350 Ban-Pu Coal Company Ltd............ 1,358,121
230,500 Cogeneration Company Ltd.*......... 621,764
</TABLE>
5
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
THAI COMMON STOCKS AND WARRANTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
ENERGY (CONCLUDED)
735,000 Electricity Generating Company
Ltd............................... $ 1,540,462
112,700 Lanna Lignite Company Ltd.......... 800,470
63,300 PTT Exploration and Production
Company Ltd....................... 830,406
------------
5,151,223
------------
ENTERTAINMENT--6.15%
222,000 BEC World Company Ltd.............. 1,912,827
33,000 Grammy Entertainment Company
Ltd............................... 368,873
119,000 Media of Medias Company Ltd........ 277,120
------------
2,558,820
------------
FINANCE & SECURITIES--1.95%
58,400 Asia Credit Ltd.................... 123,532
101,192 Dhana Siam Finance & Securities
Company Ltd....................... 54,985
168,700 Krungthai Thanakit Plc............. 96,578
145,500 National Finance and Securities
Company Ltd....................... 91,767
148,325 Phatra Thanakit Company Ltd........ 152,556
139,699 Securities One Company Ltd......... 85,397
100,600 Thai Investment & Securities
Company Ltd....................... 206,940
------------
811,755
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO--1.75%
140,900 The Pizza Company Ltd.............. $ 727,332
------------
HEALTH CARE SERVICES--0.16%
63,100 Nonthavej Hospital Company Ltd..... 64,900
2,000 Ramkhamhaeng Hospital Company
Ltd............................... 1,630
------------
66,530
------------
INVESTMENT COMPANIES--0.05%
5,300 Kamrai Tawee Fund.................. 2,006
65,000 Om-Sin Perm Poon Sub Fund.......... 19,930
------------
21,936
------------
PROPERTY DEVELOPMENT--3.29%
36,500 Central Pattana Company Ltd........ 50,291
327,650 Ch. Karnchang Company Ltd.......... 864,747
98,800 PAE (Thailand) Company Ltd......... 77,652
219,400 Quality House Company Ltd.......... 74,936
20,020 Quality House Company Ltd.
Warrants, 1999*(3)................ 2,253
330,000 Srivaraonot Real Estate Company
Ltd.*............................. 300,990
------------
1,370,869
------------
PUBLISHING--2.12%
594,800 Amarin Printing and Publishing
Company Ltd....................... 346,284
</TABLE>
6
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
THAI COMMON STOCKS AND WARRANTS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
PUBLISHING (CONCLUDED)
250,200 Nation Publishing Group Company
Ltd............................... $ 534,097
------------
880,381
------------
PULP & PAPER--0.61%
112,860 Advance Agro Company Ltd.*......... 254,061
------------
TEXTILE--1.11%
730,000 Saha Union Corporation Ltd......... 460,411
------------
TRANSPORTATION--7.27%
2,649,300 Bangkok Expressway Company Ltd.*... 2,827,702
13,200 Regional Container Lines Company
Ltd............................... 76,848
178,000 Thoresen Thai Agencies Company
Ltd............................... 115,719
35,600 Thoresen Thai Agencies Company Ltd.
Warrants, 1999*+(4)............... 4,090
------------
3,024,359
------------
VEHICLES & PARTS--1.44%
78,000 Thai Rung Union Car Company Ltd.... 283,058
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
312,000 Thai Storage Battery Company
Ltd............................... $ 314,846
------------
597,904
------------
Total Thai Common Stocks and Warrants
(Cost--$54,184,169).......................... 32,548,245
------------
</TABLE>
- -------------------------------------------
SHORT-TERM INVESTMENTS--21.88%
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
- ----------
<C> <S> <C>
THAI BAHT PROMISSORY NOTES--13.99%
100,000 Nava Finance & Securities Company,
Ltd., 19.50% (Payable on
Demand)........................... 3,881,234
50,000 Union Asia Finance Company, Ltd.,
15.25% (Payable on Demand)........ 1,940,617
------------
Total Thai Baht Promissory Notes............... 5,821,851
------------
THAI BAHT SAVINGS ACCOUNT--7.24%
77,566 Bangkok Bank Ltd., 5.00% (Payable
on Demand)........................ 3,010,530
------------
</TABLE>
7
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONCLUDED)
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONCLUDED)
- -------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
- ---------- ------------
<C> <S> <C>
U.S. DOLLAR TIME DEPOSIT--0.65%
272 Bank of New York, 3.60% due
7/1/97............................ $ 271,776
------------
Total Short-Term Investments
(Cost--$9,102,116)........................... 9,104,157
------------
Total Investments--100.10%
(Cost--$63,286,285).......................... 41,652,402
Liabilities in excess of other
assets--(0.10)%.............................. (43,580)
------------
NET ASSETS (Applicable to 6,278,588 shares of
capital stock outstanding; equivalent to
$6.63 per share)--100.00% ................... $ 41,608,822
------------
------------
</TABLE>
- ------------------------
* Non-income producing security.
+ Unlisted security. All unlisted securities have been valued in good faith
in such a manner as prescribed by the Board of Directors.
(1) Each warrant entitles holders to buy one share of Common Stock for THB
182.
(2) Each warrant entitles holders to buy one share of Common Stock for THB
200.
(3) Each warrant entitles holders to buy one share of Common Stock for THB 41.
(4) Each warrant entitles holders to buy one share of Common Stock for THB 30.
- -------------------------------------------
TEN LARGEST COMMON STOCK CLASSIFICATIONS HELD
JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
- ----------------------------------- ----------
<S> <C>
Banks*............................. 22.42%
Energy............................. 12.38
Communication...................... 8.61
Transportation*.................... 7.27
Entertainment...................... 6.15
Building Materials................. 4.62
Property Development*.............. 3.29
Publishing......................... 2.12
Finance & Securities............... 1.95
Electronic Components.............. 1.95
</TABLE>
- ------------------------
* Includes the value of warrants
- -------------------------------------------
TEN LARGEST COMMON STOCK POSITIONS HELD
JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
ISSUE NET ASSETS
- ----------------------------------- ----------
<S> <C>
Bangkok Bank Ltd................... 8.90%
Bangkok Expressway Company Ltd..... 6.80
The Thai Farmers Bank Ltd.......... 6.29
BEC World Company Ltd.............. 4.60
Electricity Generating Company
Ltd................................ 3.70
Advanced Information Service
Company Ltd....................... 3.54
Ban-Pu Coal Company Ltd............ 3.26
Telecom Asia Corporation Ltd....... 2.91
Krung Thai Bank Ltd................ 2.25
Ch. Karnchang Company Ltd.......... 2.08
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value
(cost--$63,286,285)....................... $ 41,652,402
Receivable for securities sold............. 148,864
Interest receivable........................ 2,635
Prepaid expenses........................... 49,171
-------------
Total assets............................. 41,853,072
-------------
LIABILITIES
Payable for securities purchased........... 12,194
Accrued Thai tax provision................. 20,000
Accrued expenses and other liabilities..... 212,056
-------------
Total liabilities........................ 244,250
-------------
NET ASSETS
Capital stock, $0.01 par value per share;
total 100,000,000 shares authorized;
6,278,588 shares issued and outstanding... 62,786
Paid-in capital in excess of par value..... 67,500,123
Undistributed net investment income........ 220,847
Accumulated net realized loss on
investments and foreign currency
transactions.............................. (5,211,030)
Net unrealized depreciation on investments
and other assets and liabilities
denominated in foreign currency........... (20,963,904)
-------------
Net assets applicable to shares
outstanding............................. $ 41,608,822
-------------
-------------
NET ASSET VALUE PER SHARE............ $ 6.63
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.................................. $ 951,630
Interest................................... 245,736
-------------
Total investment income.................. 1,197,366
-------------
EXPENSES:
Investment management fee and expenses..... 148,395
Investment advisory fee.................... 148,203
Administration fee and expenses............ 77,574
Legal fees and expenses.................... 54,403
Directors' fees and expenses............... 47,397
Osaka Securities Exchange fees and
expenses.................................. 44,631
Reports and notices to shareholders........ 36,158
Audit and tax services..................... 35,850
Custodian fees and expenses................ 34,620
Insurance expense.......................... 23,194
Transfer agency fee and expenses........... 11,251
Other...................................... 25,068
-------------
Total expenses........................... 686,744
-------------
NET INVESTMENT INCOME BEFORE TAX............. 510,622
Provision for Thai tax applicable to net
investment income......................... (20,000)
-------------
NET INVESTMENT INCOME........................ 490,622
-------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT ACTIVITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized losses on investments, net of
Thai tax provision........................ (4,032,050)
Net realized foreign currency transaction
losses.................................... (76,219)
Net change in unrealized appreciation
(depreciation) on equity investments...... (15,141,241)
Net change in unrealized appreciation
(depreciation) on translation of
short-term investments and other assets
and liabilities denominated in foreign
currency.................................. 43,238
-------------
Net realized and unrealized losses from
investment activities and foreign currency
transactions................................ (19,206,272)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ (18,715,650)
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income+..................... $ 490,622 $ 127,225
Net realized gain (loss) on:
Investments+............................. (4,032,050) 3,037,162
Foreign currency transactions............ (76,219) (133,277)
Net change in unrealized appreciation
(depreciation) on:
Investments in equity securities......... (15,141,241) (31,613,274)
Translation of short-term investments and
other assets and liabilities denominated
in foreign currency..................... 43,238 (27,991)
------------- -------------
Net decrease in net assets resulting from
operations................................ (18,715,650) (28,610,155)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net realized gains from investments and
foreign currency
transactions.............................. -- (20,838,173)
------------- -------------
FROM CAPITAL STOCK TRANSACTIONS:
Sale of capital stock resulting from
reinvestment of dividends................. 189,322 745,024
------------- -------------
Net decrease in net assets................. (18,526,328) (48,703,304)
NET ASSETS:
Beginning of period........................ 60,135,150 108,838,454
------------- -------------
End of period (including accumulated net
investment income (loss) of $220,847 and
$(269,775), respectively)................. $ 41,608,822 $ 60,135,150
------------- -------------
------------- -------------
</TABLE>
- ------------------------
+ After provision for Thai taxes.
See accompanying notes to financial statements.
11
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Thai Capital Fund, Inc. (the "Fund") was incorporated in Maryland on
March 14, 1990 and commenced operations on May 30, 1990. It is registered with
the U.S. Securities and Exchange Commission as a non-diversified, closed-end
management investment company.
The Fund makes its investments in Thailand through a wholly-owned Investment
Plan pursuant to a contract with The Mutual Fund Public Company Limited (the
"Manager"). The accompanying financial statements are prepared on a consolidated
basis and present the financial position and results of operations of the
Investment Plan and the Fund.
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of financial
statements. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts and disclosures in the financial statements.
Actual reported results could differ from those estimates.
VALUATION OF INVESTMENTS--Securities listed on the Securities Exchange of
Thailand for which market quotations are readily available are valued at the
last sales price prior to the time of determination, or, if there were no sales
on such date, at the mean between the last current bid and ask prices.
Securities that are traded over-the-counter, if bid and asked quotations are
available, are valued at the mean between the current bid and asked prices. In
instances where quotations are not readily available or where the price
determined is deemed not to represent fair market value, fair value is
determined in good faith in such manner as the Board of Directors (the "Board")
may prescribe. Short-term investments having a maturity of sixty days or less
are valued at amortized cost, which approximates market value.
TAX STATUS--It is the Fund's intention to continue to qualify as a regulated
investment company and distribute substantially all of its taxable income.
Accordingly, no provision for U.S. Federal income or excise taxes is required in
the financial statements.
Remittances from the Investment Plan to the Fund are subject to a Thai
withholding tax of 10% and such remittances are required by Thai law to be
derived only from the Investment Plan's net income and net realized gains on the
sale of securities. The Fund records a provision for such taxes based upon the
Investment Plan's overall net increase in net assets resulting from operations
determined by reference to the Baht.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records dividends and
distributions payable to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net
12
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
investment income and net realized gains. To the extent they exceed net
investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in capital. The temporary book/tax differences
are primarily related to the accrual for Thai withholding taxes.
FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in foreign
currency are translated at the exchange rate prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the rate
of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statement of Operations.
The Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market price of
securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Securities transactions are
accounted for on the trade date (the date upon which the order to buy or sell is
executed). Costs used in determining realized gains and losses on the sale of
investments are those of specific securities sold. Dividend income and corporate
actions are recorded generally on the ex-date, except for certain dividends and
corporate actions involving foreign securities which may be recorded after the
ex-date, but recorded as soon as the Fund acquires information regarding such
dividends or corporate actions. Interest income is recorded on an accrual basis.
INVESTMENT MANAGER AND INVESTMENT ADVISER
The Manager acts as the investment manager of the Investment Plan pursuant
to the Investment Contract. The Manager makes the investment management
decisions relating to the Fund's assets held through the Investment Plan. For
its management services, the Manager receives a fee, which accrues weekly and is
payable monthly in Baht, at an annual rate of 0.60% of the Investment Plan's net
assets. At June 30, 1997, the Fund owed to the Manager $18,504. In addition, as
permitted by the Investment Contract, the Fund reimburses the Manager for its
out-of-pocket expenses related to the Fund. During the six months ended June 30,
1997, expenses of $3,326 were paid to the Manager, representing reimbursement to
the Manager of costs relating to the attendance by its employees at meetings of
the Fund's Board.
Under the International Investment Advisory Agreement, Daiwa International
Capital Management (H.K.) Ltd. (the "Adviser") provides general and specific
investment advice to the Manager with respect to the Fund's assets held through
the Investment Plan, but the Manager makes the ultimate decisions regarding
investments. In addition, the Adviser manages the Fund's assets held outside the
Investment Plan. The Fund pays to the Adviser a fee, which accrues weekly and is
payable monthly in U.S. Dollars, at an annual rate equal to 0.60% of the Fund's
average net assets. At June 30, 1997, the Fund owed the Adviser $19,810.
A director and officer of the Fund is also an officer of the Manager.
ADMINISTRATOR AND CUSTODIAN AND OTHER RELATED PARTIES
Daiwa Securities Trust Company ("DSTC"), an affiliate of the Adviser,
provides certain administrative services to the Fund. For such services, the
Fund pays to DSTC a monthly fee at an annual rate of 0.20% of the Fund's average
weekly net assets, with a minimum annual fee of $150,000. In addition, as
permitted by the
13
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
Administration Agreement, the Fund reimburses DSTC for its out-of-pocket
expenses related to the Fund. During the six months ended June 30, 1997,
expenses of $2,574 were paid to DSTC, representing reimbursement to DSTC of
costs relating to the attendance by its employees at meetings of the Fund's
Board.
DSTC also acts as custodian for the Fund's U.S. assets. As compensation for
its services as custodian, DSTC receives a monthly fee and reimbursement of
out-of-pocket expenses. During the six months ended June 30, 1997, DSTC earned
$5,350, as compensation for its custodial services to the Fund.
At June 30, 1997, the Fund owed $12,500 and $1,021 to DSTC for
administration and custodian fees, respectively.
The Fund paid or accrued $54,403 during the six months ended June 30, 1997
for legal services in conjunction with the Fund's ongoing operations to a law
firm of which the Fund's Assistant Secretary is a partner.
INVESTMENTS IN SECURITIES
During the six months ended June 30, 1997, the Fund made purchases of
$9,492,810 and sales of $14,142,305 of investment securities, excluding
short-term securities. The aggregate cost of investments at June 30, 1997 for
Federal income tax purposes was $54,391,651, excluding $9,102,116 of short-term
investments. At June 30, 1997, net unrealized depreciation for Federal income
tax purposes aggregated $21,843,406 of which $400,236 related to appreciated
securities and $22,243,642 related to depreciated securities.
CONCENTRATION OF RISK
The Fund's investments in Thailand involve certain considerations and risks
not typically associated with domestic investments as a result of, among others,
changes in currency exchange rates, the possibility of future economic and
political developments and the level of government supervision and regulation of
securities markets.
At June 30, 1997, the Fund had 16.14% of its net assets either deposited in
a savings account at, or invested in common stock of, Bangkok Bank Ltd. The Fund
deposits monies with institutions which the Manager believes to be of high
credit worthiness, with low risk of loss of principal or interest.
The currency transactions of the Fund and the Investment Plan are subject to
Thai foreign exchange control regulations. Remittances from the Plan require the
approval of the Exchange Control Officer of the Bank of Thailand. There can be
no assurance that approval of remittances from the Plan will be granted in a
timely fashion or at all.
CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized.
During the six months ended June 30, 1997 and the year ended December 31, 1996,
18,979 and 47,242 shares, respectively, were issued as a result of the
reinvestment of dividends paid to those shareholders electing to reinvest
dividends.
Of the 6,278,588 shares outstanding at June 30, 1997, Daiwa Securities
America Inc., a lead underwriter of the Fund and an affiliate of both the
Adviser and DSTC, owned 14,460 shares.
14
<PAGE>
THE THAI CAPITAL FUND, INC.
- ----------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding during each period is
presented below:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
1997 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 9.61 $ 17.52 $ 20.11 $ 23.81 $ 12.02 $ 9.09
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss)*............... 0.08 0.02 (0.06) (0.02) 0.06 0.10
Net realized and unrealized gains (losses)
on investments and foreign currency
transactions*.............................. (3.06) (4.58) (0.51) (3.03) 12.03 3.08
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value
resulting from operations.................. (2.98) (4.56) (0.57) (3.05) 12.09 3.18
---------- ---------- ---------- ---------- ---------- ----------
Less: dividends and distributions to
shareholders
Net investment income..................... -- -- -- -- (0.06) (0.13)
Amounts in excess of net investment
income................................... -- -- -- (0.07) (0.07) --
Net realized gains on investments and
foreign currency transactions............ -- (3.35) (2.00) (0.50) (0.01) (0.12)
Amounts in excess of net realized gains... -- -- -- (0.08) (0.16) --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions to
shareholders............................... -- (3.35) (2.00) (0.65) (0.30) (0.25)
---------- ---------- ---------- ---------- ---------- ----------
Dilutive effect of dividend reinvestment.... -- -- (0.02) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.............. $ 6.63 $ 9.61 $ 17.52 $ 20.11 $ 23.81 $ 12.02
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Per share market value, end of period....... $ 8.1875 $ 10.0000 $ 15.7500 $ 16.6250 $ 22.7500 $ 11.1250
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total investment return:
Based on market price at beginning and end
of period, assuming reinvestment of
dividends................................ (18.13)% (21.03)% 8.53% (24.44)% 109.50% 25.32%
Based on net asset value at beginning and
end of period, assuming reinvestment of
dividends................................ (31.01)% (31.78)% (0.19)% (12.66)% 102.94% 35.86%
Ratios and supplemental data:
Net assets, end of period (in millions) $41.6 $60.1 $108.8 $124.1 $146.8 $74.1
Ratios to average net assets of:
Expenses, excluding Thai taxes
applicable to net investment income+.. 2.77%** 2.11% 2.17% 1.99% 2.15% 2.31%
Expenses, including Thai taxes
applicable to net investment income+.. 2.85%** 2.26% 2.29% 2.12% 2.35% 2.58%
Net investment income (loss)*........... 1.98%** 0.15% (0.33)% (0.08)% 0.41% 1.03%
Portfolio turnover........................ 21.46% 33.36% 29.90% 44.47% 58.42% 87.95%
Average commission rate per share++....... $ 0.0079 $ 0.0123 N/A N/A N/A N/A
</TABLE>
- --------------------------
* After provision for Thai taxes.
+ Ratios for the years ended December 31, 1996 and 1995 include certain
costs incurred in connection with a proposed rights offering which
have been expensed by the Fund. If such expenses had not been
included, the ratios would have been 2.07% and 2.22%, for the year
ended December 31, 1996, and 2.03% and 2.14%, for the year ended
December 31, 1995.
** Annualized.
++ For the six months ended June 30, 1997 and for the year ended December
31, 1996, the average commission rate paid on trades for which
commissions were charged was 0.3% of the principal amount of the
trade.
15
<PAGE>
- -----------------------------------------
BOARD OF DIRECTORS
Shuichi Komori, CHAIRMAN
Damrongsuk Amatyakul
Austin C. Dowling
Robert F. Gurnee
Alfred C. Morley
Virabongsa Ramangkura
Suvit Yodmani
- ----------------------------------------------
OFFICERS
Damrongsuk Amatyakul Edward J. Grace
PRESIDENT TREASURER
Daniel F. Barry John J. O'Keefe
VICE PRESIDENT ASSISTANT TREASURER
Lawrence Jacob Laurence E. Cranch
SECRETARY ASSISTANT SECRETARY
- ----------------------------------------------
ADDRESS OF THE FUND
c/o Daiwa Securities Trust Company
One Evertrust Plaza, 9th Floor
Jersey City, New Jersey 07302
- ----------------------------------------------
INVESTMENT MANAGER
The Mutual Fund Public Company Limited
INVESTMENT ADVISER
Daiwa International Capital Management (H.K.) Ltd.
ADMINISTRATOR
Daiwa Securities Trust Company
CUSTODIANS
Bangkok Bank Public Company, Ltd.
(Thai Custodian)
Daiwa Securities Trust Company
(U.S. Custodian)
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
LEGAL COUNSEL
Rogers & Wells
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
- ----------------------------------------------
Notice is hereby given in accordance with Section 23(c)
of the Investment Company Act of 1940 that from time to time the Fund may
purchase shares of its common stock in the open market at prevailing market
prices.
This report is sent to shareholders of the Fund for their information. It is not
a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in the report.
The financial information included herein is taken from the records of the Fund
without examination by independent accountants who do not express an opinion
thereon.
SEMI-ANNUAL REPORT
JUNE 30, 1997
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[LOGO]
THE THAI CAPITAL
FUND, INC.
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